Q3 2021 Baudax Bio Inc Earnings Call

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Good morning, and welcome to the <unk> third quarter 2021 financial results Conference call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session and instructions will be given it that's fine.

As a reminder, this conference is being recorded at the company's request I would now like to turn the call over to cloud you sized linger Investor Relations you may begin.

Good morning, and thank you for joining us on today's conference call to discuss <unk> third quarter 'twenty 'twenty. One financial results. This is Claudia stifle here and I'm joined today by Gerri, Henwood, President and Chief Executive Officer, and Rich cast and Chief Financial Officer on today's call Gerry will provide some introductory.

In your remarks provide a business update and discuss the continued progress around the commercialism commercialization of Entresto. Following Gary's prepared remarks, Rick will discuss the financial highlights from the quarter.

Earlier. This morning, we issued a press release detailing our financial results for the third quarter 2021.

The press release, along with a slide presentation that we'll reference for today's call is available on the infants page of the news and investors section of our website at Barrick's bio dotcom.

The slides for today's presentation are viewer controlled.

Before we begin our formal comments I'll remind you that various remarks, we make today constitute forward looking statements pursuant to the safe Harbor provision the private Securities Litigation Reform Act of 1995, including statements related to our financial outlook. These forward looking statements are subject to risks and uncertainties that may cause the actual results.

To differ materially from our expectations and forecasts and can be identified by words, such as anticipate believe could estimate target expect intend may plan predict project will and other words of similar meaning.

The following are some of the factors that could cause our actual results to differ materially from those expressed in or underlying our forward looking statements the ongoing economic and social consequences of the COVID-19 pandemic, including any adverse impact on the commercial launch of entresto or disruption in supply chain, our ability to maintain regulatory.

Korea approval franchise, so our ability to successfully commercialize and just so your acceptance of inkjet so by the medical community, including physicians patients health care providers and hospital formulary.

Our ability and that of our third party manufacturers to successfully scale up our commercial manufacturing process franchise, so our ability to produce commercial support supply in quantity and quality sufficient to satisfy satisfying.

Satisfy market demand for Entresto, and our ability to raise future financing for continued product development and it just so commish commercialization, our ability to pay our debt and satisfy conditions necessary to access future tranches of debt our ability to comply with the financial and other covenants under our credit facility.

Our ability to manage costs and execute on operational and budget plans the accuracy of our estimates of the potential market franchise, so our ability to achieve financial goals and our ability to obtain and maintain and successfully enforced adequate patents and other intellectual property protection. This list of important factors is not all inclusive.

Any such forward looking statements are not guarantees of future performance and involve certain risks and uncertainties.

These risks are described in the risk factors and the management's discussion and analysis section of <unk> annual report on Form 10-K for the fiscal year ended December 31, 2020, and any quarterly reports on Form 10-Q, which are on file with the Securities and Exchange Commission and available on the SEC's website.

Any information we provide on this conference call is provided only as of the day of this call and remember for 2020, one and we undertake no obligation to update any forward looking statements. We may make on this call on account of new information future events or otherwise.

During the course of today's call, we will refer to certain non-GAAP financial measures a reconciliation between the GAAP and non-GAAP financial measure is included in our earnings release, which is available on our Investor Relations website at box bio Dotcom Backsides, some news and investors.

I encourage you to visit our Investor Relations site to access our earnings release periodic SEC reports, a replay of today's call or to learn more about biotic style.

I'd like to turn the call over to Gerri Henwood Gerri.

Thanks, very much Claudia and good morning, everyone I'm going to use the slide deck that we have filed with this earnings support and just go through some highlights of what's happened in the quarter. So if I move first to the executive summary, slide just says.

As an overview I believe that we are tracking an exit rate for 2021 that will put us in a position to provide for more robust growth. The van Jeff. So in 2022 everyone is leaning into that to make sure that we're in a position to be having a good start to next year with the put into this.

Here.

Our growth we saw was accelerating in September after the summer Delta Varian peak had definite impact during July and August, which we'll talk more about in a minute.

Peer to peer programs, both in terms of things like speakers bureaus as well as.

Former directors of pharmacy, or health economics experts interacting with their peers at hospitals directors of pharmacy.

I think both of those are helping us to gain more momentum. In addition to the very strong efforts of our field force and ancillary groups and it's setting the stage for Q4 and for 2022.

If we go to the next slide you'll see that during the third quarter of 'twenty. One we saw not as robust a growth in existing hospital sales, which we account mostly to what was happening in July and August because of the Delta variant and the diminution of elective surgeries.

In the southern States in particular, which were most heavily affected and which you'll see counts for a reasonable amount of our current business. However growth in the ASC Arena was more robust that was about 66% and I think reflects the fact that they were less affected generally than where the hospitals.

During this period of time.

We go to the next slide you'll see that we are over 150 formulary wins by the end of Q3 are our panties success rate is continuing to be we think pretty robust at about 84% of the top five F C's and service providers.

Have been included from one of the accounts that we've got and that has a 125 nationwide accounts, we have their overall formulary approval, we haven't counted more than the five that have individualized approval and that then.

Then that plus another three are getting us into implementation right. Now there are a number of others that are pending but haven't gotten it through for instance, their electronic health records et cetera. So we're encouraged that we are poised for more growth and more success because of that.

If we go to the next slide slide five on some of the highlights you know just wanted to talk about what's going on in the different sectors that we're dealing with if we start at the top right corner of the circle integrated delivery networks, we have had growth in I D and you know a tough.

Aerie to penetrate because they're big and quite deliberate about their decision, making but we have one top ideas nationally who has been using our product releases in the orthopedic and anesthesia service lines and then we've got a five hospital groups that we've got in formulary approval and and we're getting.

Implementation in that that is beginning to help accelerate growth as well if we go down to national I S secrets as I referenced on the formulary page. There is a very large one of the top five nationally group that has the prove that somewhere in a rollout of those accounts and in the first month.

Since that was approved we have about 10% of those accounts have come online and are beginning to order and I think you know that was a pretty quick turnaround for the amount of integration that had to happen in that but you know the goal is to continue nationwide in each of the regions to try and tick down more.

Of these members and the members who have been using a product prior to this.

National relationship with them has been very enthusiastic about the product and are spreading that to others within that group.

If we keep going around the circle counterclockwise.

Likewise to a S. Six per se individual a S sees we don't have a number of large I S sees with whom we've got our volume based contracts and we see good progress there in California, and Texas with those Isps.

So up to the top and just say, what's another segment of the market that's important to us regional hospitals and regional hospital groups and so we have a surgical hospital in the south central that had had a change of anesthesia groups. They had switched out an anesthesia group that had been managing their patients.

And the new group came in and had to be converted again in their decision.

Are they going to be using what products would be part of their normal routine usage, we were able to get renewed and that there was a lack of a couple of months in between those two situations, but where we're back in the swing with surgeons, who like the product and anesthesiologists, who are happy with it and we've got a top regional.

Hospital that has just recently added and just based on their clinical experience. So we we're feeling good that we are we're hitting all of the cylinders that we need to hit obviously, we want to do more and more of that but you know a lot as you know hospital launches a lot of it and this year really we see as our first year of a launch because last year.

With Covid, but it's not really representative at all.

We're looking at getting the kinds of.

Les out of approvals that we need to have to be able to expand on and grow on and use as references for further growth as we're in 'twenty two.

If we move up to.

Slide six.

There's a way that we approach. These larger accounts that we think makes sense and it has seemed to be very successful for us. So we're continuing to implement that and that is you know we start with the smallest circle, where we're creating awareness clinical advocacy, making sure that we have individuals who have had.

Had an experience with the product because we find that trial usage is very converting people use the product and see that it does work that it does contribute meaningfully to pain relief over a 24 hour period for their patients. They are often converted it becoming champions and widening their adoption and ines.

So orders.

Subsequent to that we will work with their teams and with the organization that they are a part of to make sure that we've got communication, that's top down coming as kind of the next step. So we're working with their pharmacy director, we're working with others in their administration to talk.

About the product talk about its advantages do in services. So that as there is demand bubbling up from people who are using it in trial usage.

Then in a situation, where we can go to that third circle, which is a direct model setup. They have the opportunity to order directly from us and there is some discount that can be passed on to them through that based on the volume of their usage and then ultimately doing a defined.

Contract that supports that once they have a little bit more comfort about what they anticipate.

The near intermediate term volume to be and that's something that we can adjust if their volume picks up.

So that's it's just a way of looking at how are we approaching both from the bottom up and top down working these larger accounts such as audience or national accounts on the ASC side.

I'll talk for a minute about the impact of the pandemic I know, we're all sick to death of hearing about Covid me too, but it is still a factor that periodically and sort of whack a mole fashion pokes its head up and that certainly did happen. This past summer so on slide seven youll see that.

Forrarder, Texas and North Carolina are our top three states and account for about 40% of our sales right now and these states were among the highest percentage of hospital suffering from extreme.

Dress based on Covid hospitalization. So this extreme stress doesn't mean that people were feeling tired. This means they were in a situation where they had to curtail or eliminate elective surgery, because they had such bad demand for treatment of COVID-19 patients that they could not add major surgeries that could result in <unk>.

Leading a bad.

Even if it was anticipated to have been a same day surgery complications do occur. So this did impact us as you can see pretty dramatically and the.

These three states that had an impact now in spite of this we did grow and I'll just reinforce this a little bit if we go to the next slide which is based on like T. V. A data you see the orthopedic and other procedures declined significantly during this summer COVID-19 flair to it just to reinforce what was <unk>.

Happening in these in these states in particular, although there was some other states affected.

Separately, just as a because we've had some folks asking where are we seeing a highest usage of vantage also surgically just under half of our usages in orthopedic procedures are about 20. Some percent is associated with other types of pain and with the use of a radio frequency.

Felicia procedure, which itself produces pain and about.

About 16% and Urologic and gynecology cases.

If we go to slide nine.

You see that we are getting quarter over quarter growth in spite of what I've just talked about with respect to the impact of Covid in July and August for the quarter, we still showed growth.

We showed growth you can see the rebound in the line slide to the left.

And this was through the end of September and units sold by quarter are continuing to grow very nicely even through the COVID-19 and that's it.

Part of what we're trying to help our team being able to do find ways to win even when the unexpected happens so whereas last year, we were very stymied by Covid. This year. It did slow the impact of it in that quarter, but we still grew through that quarter and were still getting new contracts and were still.

Moving ahead, and that's what we continue to see going forward as part of the plan for it for the brand I'm going to switch now to have Rick talk a little bit about the financial results and then I'll come back and talk a little bit about closing the year and what we expect for 'twenty two Rick.

Thank you Jerry.

Good morning, everyone.

Now I'll refer you to slide 11, the Q3 versus Q3, 'twenty one versus to Q3 'twenty financial results.

Since we issued a press release and filed our Form 10-Q with the SEC earlier. This morning outlining our full financial results for both the quarter ended and year to date periods ending September 30, 30th 2021 and 2020.

I'll just touch on some of the key highlights from the quarter.

As of September 30th 2021, we had cash cash equivalents and short term investments of $24 $9 million. The change from Q2 reflects our normal operating cash burn for the quarter supporting our commercial research and development and commercial and corporate operations.

Net product revenue recognized according to U S. GAAP for the three months ended September 32021 was <unk> 3 million and was related to the sales and in Jesup and the U S.

There was approximately $2 $1 million of product revenue recognized for the three months ended September 32020.

The increase was primarily attributable to the additional formulary approvals and generating trial and adoption of inkjet, so resulting in increased end user demand when compared to the prior year quarter.

Cost of sales for the three months ended September 30th 'twenty, 'twenty, one and 'twenty 'twenty was $5 million and consisted of product cost royalty expense and certain fixed costs associated with the manufacturing and gesture, including supply chain and quality costs.

We expect that overtime product costs and cost of sales will increase as sales increase and inventory values changed to include all direct and indirect costs.

Research and development expenses were $7 million for the three months ended September 32021, compared to $1 $5 million in the prior year quarter. The decrease was primarily attributed to lower personnel cost.

As well as lower clinical cost in the current year period.

Selling general and administrative expenses for the three months ended September 30th 2021 were $11 1 million compared to $13 $8 million for the same period a year ago. The.

The decrease of $2 $7 million was primarily a result of a decrease in personnel costs of $3 $1 million as compared to the prior year period.

We reported a net loss of $17 million were a loss of 20 cents per diluted share outstanding for the three months ended September 32021, which includes a noncash charge of approximately $5 $7 million, primarily associated with the change in fair value of contingent consideration.

<unk> based compensation and amortization expense.

Alright.

Adjusted net loss for the three months ended September 32021, it was $11 $3 million compared to an adjusted net loss of $13 5 million in the prior year period, a decrease of $2.2 million.

With that now I will hand, the call back to Jerry.

Comments on close in Q4 and preparing for 2022 sure. Thanks sure.

So if you don't mind, we'll go to slide 13, and that same deck, we were in before.

Just to look at how are we talked about the ingredients that we're using to try to efficiently and cost effectively penetrate the market play the plank. So that there's an opportunity to accelerate in 'twenty, two and beyond so I'm going to start from the top right again looking at the telesales.

So we've mentioned to you before that we were using telesales, we're using a traditional telesales support is quite cost effective to support the field sales, which expands reach and gives us a little more opportunity for reinforcing some messages is not effective enough said he could replace.

Representatives, but it is certainly very helpful announcements the impact of the messaging, we added an experienced specialists telesales group, which has much more experienced reps.

They are more expensive than the traditional telesales, but still less expensive than a full rep, but they're helping us to cover areas, where we've had indications of interest and we don't have a rep in that field and it's not large enough at this point in time to warrant putting a rep. There, but this is a group that has done.

A job even recently they've only been really in position since late summer and they have already had one conversion where they followed up had a series of zoom calls has some of our specialists also on these calls, but then we're able to convert and get a formulary approval and the product is.

Now on formulary in a hospital. So we're trying to use novel means that leverage the terrific assets that we have in our reps and have allowed us to make some progress there are AC asses, our acute care specialists, they're leading in targeted accounts and.

They have obviously you know short term midterm and long term goals for their territory for the accounts that they have they're working in making progress on those formulary approvals and then penetration in addition of <unk>.

Service lines and within service lines, expanding to other providers and through that getting more business throughput in the hospital and in the a S.

Our regional business directors are player coaches. So you know in our organization everybody sells everybody supports and the RV DS you know are a key part of that they're not only managing and coaching your reps, but they are covering a number of accounts themselves and some of the <unk>.

Or accounts that require more than one person to be working them, they're working that they act as a quarterback regionally and they manage performance, but they're also bringing home the bacon themselves.

H T or health economics specialists. These are former directors of pharmacy and hospital and we think that experience and perspective is key and relating to important gatekeepers institutions, particularly hospitals put in.

Some of the larger ASC networks, as well, where they need to have enough information to validate the PNT approach because often they're the ones who are the organizers and administrators of the PNT with other membership and so getting them onboard is key.

And then it has been helpful. Because not only can we cover the clinical data is central to formulary with them, but also you know situational usage service line appropriateness, so that they're not concerned that we're trying to be everywhere in the hospital.

Way to get onto the formulary is to have some individual lines of usage have that workout have everybody see that it can happen in a responsible and effective way and then expand from there.

Our key account managers directors of national accounts.

They work topped out there going into the C suite to larger idms to larger ambulatory surgery center chains.

Working through with them, both the benefits of the product, bringing in other specialists says they need for those discussions around formularies and ultimately typically doing some volume base.

Contract that would allow for the acquisition price to remain competitive for those ideas in the system.

They are also very important in orchestrating with be it with our Acs as our reps where are the sort of fall out of those contracts. So that the pull through can happen and the you know just having a contract in place doesn't mean that there is business. There you have to work through them.

Sure.

Into the electronic Health records and so on and that is all being coordinated with the army DS in the DNA and the individual reps.

In journals certain a regular weekly news type formats that we can have the information and so that its appropriate to that particular specialty.

Okay.

If we go to slide 15, you know again I mentioned earlier trial usage seems to be the key.

I think people like the story like the profile, but they need to see for themselves that what we've been talking about is what they're going to generally experience with the patients in whom they use the product. So early trial usage is important so once we have enough to get into an account it's really key.

But we are getting the surgeons to select an appropriate patient and try the product and follow that patient and then try a couple more and that really seems to be the key to be able to expanding usage of the product and for them to see and just so as the solution to some of their problems.

And some of the patient types, where they may not want to use and other type of agents.

So keeping everybody focused on the business plans that lead to this is key for our continued success. So if we go to slide 16.

What are we doing now that we think is going to help us through.

The entrance too in that kickoff our 'twenty two we've got to end the year at or above our forecast. We think that is that is in place and that we're moving towards that.

We are positioning 'twenty two for accelerated performance.

And we believe that we are still on a track that can let us have as a realistic goal getting the brand to be approximately cash flow breakeven by the end of 2023.

Long term prospects for the brands will remain positive from all the feedback we have from clinicians that are using the product really liked it and more people are saying they want to use the product and we're trying to help them get it through the formulary process.

The tactical plan remains in place people are hyper targeting accounts based on priorities to make sure that we are getting into places, where we have an opportunity to expand and deepen their usage expanding the contracting strategy helps with large system wins and these market research insights.

Such as I went through on the page before about targeting messaging is a part of that in terms of staffing.

Because of the Covid impact in certain markets during July and August we have deferred some plans that would have added additional territories. In this quarter you know by the beginning of October we had talked about roughly being at 40 reps. Instead, we have just grown to 34.

And we're gonna stay at about 34 reps until we get into 'twenty, two and you have an opportunity to get a couple more contracts signed which would seem to make sense for the additional reps to be able to pull through and service. Those we are continuing to work to enhance the effectiveness of our representatives with ongoing.

<unk> training, including competitive product training micro learning targeting etcetera. So we in summary, our feeling.

Very good about and as Jeff said, we're not satisfied with the sales. We know you are not satisfied with the sales, but it's hard to launch a hospital product, we're making good progress this year and we think we'll be able to expand on that significantly in 2022.

So.

I would like to sort of summarize everything in saying that we think the product continuing to show meaningful growth.

And revenues up 40%.

In the quarter over quarter period, and because of Covid last year, we see the kind of crazy number of 300% up year over year, but I really think we focus on continuing quarterly growth that's important for us.

And despite the regional impact of Delta for variance on the number of surgeries in the southern U S. We did see a significant uptick in sales to new accounts in Q3, growing an estimated 66% quarter over quarter.

With respect to our N MBS, which I have not spent much time on this call. We do look forward to providing an update on VX 1000, our intermediate duration neuromuscular blocking agent drug candidate and.

The not too distant future once we've completed the data analysis portion of the dose escalation trial that recently completed the clinical portion of that trial.

We remain very enthused about our N M b portfolio and reversal agent as well.

In closing we continue to receive positive feedback from those using and just so and looking forward to more progress and keeping you updated on that progress as we continue to educate.

Health care professionals and physicians on the overall benefits of and Jeff. So I'll now turn the call over to the operator for any questions.

And that concludes our prepared remarks, we will now open the call up for question and answer ask a question you will need to press Star. One thing was on the phone to withdraw your question first the pound key.

Our first question comes from the line of David <unk> from Piper Sandler Your line is open.

Hi, everyone. This is Jack on for David Thanks for taking my question My question and congrats on the I'm a payer access front.

Just qualitatively do you expect the pace of PMT Committee meetings to continue to be robust going forward and it was just trying to get a sense of your target generally in terms of formulary wins over the next few months and maybe the next couple of years.

Yeah, So I mean, if theoretically.

<unk>.

We expect that the <unk>.

Massimo formulary approval of that very large top top top five a S. C national chain will in the reasonably near future add significantly to that number. In addition to that you know we are focused on particularly IV ends because the impact that.

They can have in terms of leveraging usage and a number of institutions and then the pull through in those institutions. So in the reasonably near term you know we could see anywhere between 60, and 120 approvals and they could grow to be more than that so you know it's it's a key.

Area for us, but we're not we're not just picking flowers just to increase account, where it takes a while to get the bigger institutions through but they're worth a lot more volumes. So that's really where our focus is is unhelpful.

Yes that makes sense and then just one follow up sorry, if I missed this but what is the current mix between the ASC and hospital settings right now for Entresto and so we're just yeah sorry, yeah.

Go ahead, and we're about 50 50, it's just like you know varies on the given month one's up a couple percent see others up a couple percent, but it's it has been roughly the same and that's why I think it hit us a little more when Delta hit, Texas, Florida, Alabama, and a number of other southern.

States because the hospitals there were affected as you could see in AR and the growth rate in the hospital sector compared to ASC.

Yeah that makes sense. Thank you.

Thanks Zack.

And again, we'd like to ask a question just first star one on your telephone keypad. Your next question comes from the line of Leland yourself from open timer. Your line is now open.

Hey, good morning, Thanks for taking my question good to see the.

To pick up particularly in the afcs.

In the third quarter it looks like hospitals as you say were suppressed by the.

Covid stress based on what Youre seeing.

For Q can you kind of comment on where youre seeing hospitals versus the prior trend is that kind of getting back on track versus what we had seen from <unk> to <unk> is it is it even better.

And then also wanted to ask with respect to pull through.

Between <unk> and the hospitals is once the purchase available on formulary are there.

Protocols in place for rich and Jim.

So it becomes kind of required are part of a protocol or is it ultimately all these part of physician oriented to join his choice.

Expect to use the product thank you.

Cleveland Great questions as always so first I'll talk about our hospitals.

Theres, a little bit of Funkiness going on in certain geographies right now it seems more related to staffing issues and hospitals than to Covid. So in September which was our strongest month ever we saw things looking quote more normal but in October there seems.

To be Oh.

Little bit of a drop off in surgery rates for elective surgeries or postponement and the reason that we're hearing from the physicians surgeons, who are frustrated because they want to be doing more surgeries is of staffing issues either for managing those patients post operatively or associated with the team.

<unk> with whom they operate so I don't know if that will have an impact, but you know we're going to hit the Goldman matter, what because the team is concentrating on those areas, which are less affected by that issue and also with the a S. C growth that gives us some opportunity for balance and continue for.

There in terms of pull through it. It's a good question. How does this set up so let's talk in patients first on the inpatient side once we get on formulary getting into the electronic health record, which generally reflects that service line.

<unk> agreement on a protocol and you're in the drop down menu that they can check off for the postop surgical routine now that if you've got a big hospital that has multiple groups, let's say multiple orthopedic groups that are practicing you might have to.

Insinuate yourself into two or three of those EHR dropdown protocols, because they all vary a little bit in terms of the tweaks, but virtually all of them want to have an NSAID in there and we were we have been able to get also formulary and where we are able to do some volume.

Contracting if we want to be that instead of choice and are typically in there as the only choice you know.

For the <unk> said that would be in that particular protocol.

It will you know we don't have as broad a set.

With general surgery jet in the hospital environment their volume of surgery has seem to lag the return to normal volumes that we're seeing more with the orthopedic group than with the general surgery group in the outpatient environment, it's a little bit easier to get into their records sets.

And typically the surgeon doing surgery in the ASC environment also has a bigger voice and so that is a little bit more efficient in terms of adoption.

We do still see that there are significant number of patients who are being managed in the hospital. So we it's trying to keep both of those tracks running at the same time, it's important to us.

Great. That's very helpful. Thank you.

Thanks Lou.

And we're showing no further questions I'll now turn the call back to Jerry for closing remarks.

Thank you operator, and thanks, everybody for joining us. This morning, I Hope you have a great rest of the day, it would be well and stay safe Bye bye.

And this concludes today's conference call. Thank you for participating you may now disconnect.

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